Spirits surge ahead but duty increase threatens to stunt growth

From the countless craft distilleries springing up left, right and centre to the uptake of elaborate Spanish-style serves; you may have noticed gin has been enjoying something of a renaissance.

Of course, this has been in full swing for several years, but now in an industry first, spirits have brought more money to the Treasury than beer – and Brits’ insatiable thirst for gin has been a key factor in this change.

The latest HMRC figures reveal that over 2016/17 spirits duty brought in almost £3.38bn, pipping beer – which brought in £3.32bn – to the post for the first time.

The Wine and Spirit Trade Association (WSTA) said that a massive 12% surge in gin sales over that period is responsible for the shift, along with a freeze in spirits duty which has resulted in an extra £225m in revenue from spirit drinkers.

‘The WSTA dubbed 2016 the year of gin and the gin boom has had a large part to play in the windfall now being enjoyed by the Treasury. The 7% increase on revenue takings came as a result of the Chancellor freezing spirit duty in 2016 and allowing the industry to grow and invest,’ said Miles Beale, chief executive of the WSTA.

But there may be trouble in paradise. A painful 3.9% rise on alcohol duty was announced in the March Budget, which added 30p to the average bottle of spirits.

‘Freezing spirits duty brings rewards, which is why the inflation-busting rise in duty this year was such a disappointment and threatens the industry’s ability to invest, grow and export,’ Beale added.

Over three-quarters of the price of a bottle is already taken up by duty and VAT. On the average bottle of gin or other spirits (£19.52), consumers pay £10.33 straight into the Chancellor’s pocket, or 76% of the total – the fourth highest spirits duty rate in the EU.

This means that the UK pays 25% of all spirits duties collected by EU member states – more than Germany, France, Poland, Italy and Spain combined.

Wine remains at the top of the table cashing in over £4bn for revenue coffers this financial year, while cider was the only sector which did not enjoy growth, down 3% on the previous year.

We shudder to think how further Brexit turbulence will affect the already lofty spirits rate, but at least for now, it looks like G&T’s all round.